Commercial lines deregulation is having a moment

Insurance long has had a reputation as one of the most conservative industries and that reputation is, in many ways, an earned one.

Certainly in comparison to their financial services cousins in banking and securities, insurance company operations on both the investment and underwriting sides of the book tend to be far less exotic, which is probably mostly for the good. When the product you offer is nothing more or less than a solid promise, safety and security will always be paramount concerns.

At the same time, the emergence in recent years both of new industries and new kinds of risks – from marijuana dispensaries to self-driving cars, and from private flood insurance to all manner of cyber protections – offers both opportunities and challenges for insurers, and these can prove difficult to meet through the prescriptive state-based regulatory system.

Thankfully, as our recent 2017 Insurance Regulation Report Card highlights, there are signs that the states are beginning to step up to the challenge with efforts to modernize their regulatory frameworks for commercial lines in ways that could help companies bring new products to market much more expeditiously.

Among the most notable efforts in 2017 was Oregon’s S.B. 985, signed into law in June by Gov. Kate Brown. The law eliminated the requirements to file rates and policy forms for a host of commercial lines of business, including surety, marine, trucking, boiler and machinery, environmental, kidnap and random, political risk and most forms of commercial property insurance.

Similar rate and form reform legislation sailed through the Missouri House of Representatives in April by a 144-4 margin. The bill, H.B. 741, would apply to essentially all commercial lines except workers’ compensation, medical malpractice and small fleet commercial auto. Alas, the measure didn’t progress past the state’s Senate Insurance and Banking Committee.

Even in California, home of the notoriously onerous Proposition 103 regulatory system, progress was made toward a more streamlined process to offer specialty insurance products through the surplus lines market. Gov. Jerry Brown in October signed A.B. 1641, which expands the list of insurance risks that brokers can bring directly to the nonadmitted market without first having to prove that placement was declined by admitted market carriers.

Do three isolated legislative developments constitute a trend? Perhaps not, but there are reasons for optimism that, if commercial lines deregulation can play well even in heavily regulated states like Oregon and California, it has a pretty good shot at spreading nationwide.

Oklahoma Insurance Commissioner John Doak, who chairs the National Association of Insurance Commissioners’ Property and Casualty Committee, could help lead the charge this year. At the group’s fall meetings in Hawaii, Doak’s committee requested that state regulators update a 2015 survey on commercial lines modernization to gauge what progress has been made in the past three years.

“I anticipate the work done by the committee next year will focus on putting the survey results into action items,” Doak told Best’s News Service in December. “It’s our hope that the committee will advance this important work for the benefit of commercial consumers and insurers.”

The insurance industry might be stodgy at times, but as the rapid roll-out of new insurance rules for ridesharing has shown, the states also can move pretty quickly when they see an opportunity to do so. Sometimes all it takes is a few voices to lead the way.